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Walkout shadows free trade's future

(Wednesday, Sept. 17, 2003 -- CropChoice news) -- Paul Blustein, Washington Post, 09/16/03: The walkout staged by some of the world's poorest countries that abruptly ended global trade negotiations in Cancun, Mexico, underscored a bedrock question: After decades of rapidly advancing globalization, do the nations of the world lack the stomach to open their borders further to trade and investment?

The prospect that free trade might be reaching its limits, deeply unsettling to some and cheering to others, arose in the wake of the collapse Sunday of World Trade Organization talks. The Cancun meeting, which was supposed to invigorate negotiations launched two years ago for a new pact to lower trade barriers worldwide, broke down amid accusations by developing nations that rich nations were refusing to offer meaningful concessions, all but dooming chances that agreement will be reached by the self-imposed deadline of Jan. 1, 2005.

Yesterday, officials of the developing countries that had forced the rupture were emphasizing that they were still interested in reaching a deal, and trade experts pointed out that brinkmanship and delays are the norm, not the exception, in global trade rounds. But well before the Cancun meeting, the 148 member nations of the WTO were struggling to reach agreement even on basic procedural issues, and the debacle at Cancun has laid bare the enormous obstacles that must be surmounted for a pact to be concluded.

At bottom, the problem facing the eight-year-old WTO can be blamed on its success -- and that of its predecessor organization, the General Agreement on Tariffs and Trade -- in sharply reducing trade barriers during the post-World War II era.

After eight rounds of negotiations that slashed tariffs and dismantled other obstacles to the movement of goods and services across borders, the United States and the European Union -- the two biggest players in the organization -- "essentially have very little to give, except the most politically sensitive areas that have survived the previous rounds," said Jeffrey J. Schott, a trade specialist at the Institute for International Economics. In Europe, the most sensitive area is the highly protected farm sector, and in the United States, it is not only agriculture but also the textile and apparel industries, where tariffs remain high in part because of the clout those industries wield in Washington.

The Europeans are extremely reluctant to give up subsidies for their farmers. As for the United States, Schott noted, if U.S. Trade Representative Robert B. Zoellick offers major concessions in agriculture and textiles to strike a bargain, "Congress will only accept that if they get a good payoff in return," meaning promises by developing countries to significantly increase access in their markets to foreign goods. But many developing countries indicated at Cancun that they are deeply resistant to exposing their industries further to international competition, "and if you were Bob Zoellick, you'd have to ask, 'Do I want to spend time with these guys who don't seem to want to negotiate?' " Schott said.

If that dynamic persists, globalization, at least in its economic form, appears likely to hit a relatively slow patch for a number of years. That doesn't mean that the world trading system would cease to function as it does now; the Geneva-based WTO would continue to police global commerce and adjudicate disputes among member nations. But at the very least, failing to conclude the WTO negotiations, which were launched at Doha, Qatar, in November 2001, would mean passing up a major opportunity to expand world trade -- one that, according to the World Bank, could boost global incomes by as much as $500 billion a year, enough to raise 144 million people out of poverty by 2015.

The growing backlash against free trade in rich countries, and parallel trends in the developing world, may make such an outcome inevitable, trade experts said.

"The hemorrhaging of U.S. manufacturing jobs and the persistence of high unemployment have placed Zoellick in a position where he has very little room to maneuver," said Daniel K. Tarullo, who served as President Clinton's international economic adviser. Neither the EU nor the United States seems capable of offering much to the developing countries, he added, because "both are restrained by a lack of political support at home for trade expansion and by the political strength of their farmers."

The gloom among free-trade advocates over the events in Cancun was leavened by the belief that the meeting could ironically spur progress toward a global trade deal by drawing world attention to the issues that were raised by the developing countries -- in particular, the $300 billion that rich nations pay in subsidies to their farmers. Those subsidies lead to overproduction of many crops, such as cotton, which are then dumped on global markets, depressing prices and hurting farmers in poor lands.

"It's pretty embarrassing for the United States to be seen in an argument with Benin and Mali, two very poor countries, over cotton subsidies," said Edward Gresser, a trade expert at the Progressive Policy Institute. "In a way, it's nice to see countries like that using the system in the way that it ought to be used."

Poor nations were delighted with the propaganda points they scored, and the unity they maintained, at Cancun. "This is the best thing that has happened to developing nations in a long time. I mean, for heaven's sake, if Africans have to compete with rich nations on the price of exporting a mango or rice or cotton or yogurt, how can we ever work our way out of poverty?" said Lucia Quachey, national president of the Ghana Association of Women Entrepreneurs, based in the country's capital, Accra. "It had to be done. A dramatic stand had to be taken."

But, Gresser warned, "ultimately this could be a hollow victory for them." The only realistic chance for reducing the farm subsidies lies in successful completion of the Doha round, he noted, "and if that doesn't get back on track, what good have they done themselves?"

Agriculture was not the only source of friction at Cancun; in fact, the direct cause of the breakdown was the failure to agree on whether a final pact should include WTO rules, sought by the EU and Japan, in areas not currently covered by the organization such as cross-border investment and antitrust.

Whatever the cause, one of the effects will clearly be an intensified effort by the Bush administration to negotiate bilateral free-trade accords with individual countries and groups of countries, similar to the North American Free Trade Agreement. Zoellick recently wrapped up such deals with Chile and Singapore, and he has also launched talks with five Central American countries, Australia, Morocco, and several southern African countries.

French Foreign Minister Dominique de Villepin warned in a French radio interview against "the temptation" of bilateralism, echoing the widely held concern that such deals can undermine the WTO .

One of the purposes of bilateral pacts is to prod recalcitrant countries to come around in the WTO talks, because they would fear that other nations will gain a competitive edge in the giant U.S. market. But many of the countries with whom Washington is negotiating free-trade pacts are among the Group of 22, which played a key role in standing up to the United States and the European Union at Cancun. They include Guatemala, Argentina, Costa Rica and Brazil.

Underscoring the problems Washington has in pursuing bilateral and regional deals, Roberto Rodriguez, Brazil's agriculture minister, said yesterday that the failure to reach an agreement at Cancun jeopardized not only the WTO round but also the U.S. efforts to negotiate a Free Trade Area of the Americas, which would include all the nations of the Western Hemisphere except Cuba. Brazil, the largest nation in Latin America, has staunchly maintained that it would not join an FTAA without obtaining major concessions from Washington on agriculture subsidies; yet at the same time the United States has insisted that a deal on subsidies can only come as part of a WTO agreement.

A senior U.S. official, briefing reporters yesterday on the condition that she not be named, pointedly emphasized that "we will continue to move ahead on the regional and bilateral level." Although the official emphasized that the administration remains as committed as ever to securing a WTO deal, she acknowledged that Cancun raised serious concerns about the prospects.

"Here's a fact as we come out of Cancun: Bold reform on the global level has been delayed," she said. "For countries like us that have been interested in reducing farm subsidies, in reducing goods barriers, that is now delayed. . . . Now how far does that time frame change? We'll see."

Correspondents Jon Jeter in Buenos Aires; Emily Wax in Accra, Ghana; and Keith Richburg in Paris contributed to this report.